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JOINT COMMITTEE ON ECONOMIC REGULATORY AFFAIRS debate -
Tuesday, 16 Nov 2010

Cost of Regulation: Discussion with Vintners Federation of Ireland

Today we are meeting the Vintners Federation of Ireland to discuss the cost of regulation and the main areas of compliance for the licensed trade. On behalf of the committee I welcome Mr. Padraig Cribben, chief executive, Mr. Gerry Mellett, president, and Mr. Thomas Heraghty, a member of the executive council.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to the committee. If they are directed by the committee to cease giving evidence in regard to a particular matter and continue to do so, they are thereafter only entitled to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the long-standing parliamentary practice to the effect that, where possible, they do not comment on, criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

The meeting is being web-cast live and can be seen worldwide on the Internet. I ask Mr. Cribben to proceed with his presentation.

Mr. Padraig Cribben

Thank you, Chairman. The Vintners Federation of Ireland represents approximately 4,300 publicans in the 25 counties outside of Dublin. We represent a range of various publicans, from those in very rural pubs to those in bigger outlets in towns and cities and destination-type outlets. There are various types of pubs: some do food and others do not; some have late bars and others do not; and we represent all types of pubs outside of Dublin.

The drinks industry is very significant in the overall scheme of things. It employs approximately 78,000 people, of whom 69,000 are engaged in our sector, which is the labour intensive pub trade sector. Last year, €1.15 billion was paid in wages and salaries in the pub sector. The pub trade is a major employer of people, particularly in areas where jobs are generally quite scarce and this is quite important. In addition, the drinks industry provides in excess of €2 billion to the Exchequer each year by way of VAT and excise. In many ways, it is a significant contributor to the Exchequer. However, it is a business in turmoil. Alcohol sales decreased by 14% in the first eight months of this year and have decreased by approximately 24% in the past three years. Sales in pubs have been significantly replaced by sales of alcohol, sold below cost, in the supermarket trade. As a result of this, and some of the other issues to be referred to later, many pubs have gone out of existence. The most recent Revenue figures for the licensing year 2009 to 2010 show that more than 900 licences were not renewed. This represents approximately 14% of the total stock of pubs in the country.

The pub trade is highly regulated in terms of legislation and rightly so. Alcohol can be a mood-changing product and a licence is required to sell it; as a result there have been reams of significant legislation covering the operation and control of licensed premises. Some of this legislation dates back to the mid-1800s and has been constantly changed and updated in the decades since. While elements of the overall regulation are understandable and acceptable, it is the cumulative effect of certain aspects that cause considerable issues and are a distinct disincentive to employing people in the sector. While this regulation is rigorously imposed on the pub sector, one has to ask whether the overall regulation is even-handed when one considers the laxity with which the supermarket trade is regulated.

Before we set out the framework in which a pub operates it is important to understand that our main competitor is allowed to sell alcohol below cost, market it and promote it in a somewhat cavalier way and treat it as a loss leader in the same way as it might otherwise treat biscuits, bananas, beans or any other grocery product. It does this against the background of a so-called "voluntary code of practice" which is allegedly independently monitored. However, it is very difficult to see the independence in the monitoring when the watchdog is financed by the operator.

The 4,500 publicans whom I mentioned earlier must negotiate with their major suppliers as independent operators; they cannot come together for the purposes of buying alcohol. Competition law prohibits any combined use of buying power for alcohol by publicans at a time when the supermarkets, under the strength and guise of one commercial organisation, can use the combined power of hundreds of outlets to achieve very significant price reductions. They can then sell these below cost on occasion and use alcohol as a loss leader to entice customers into their premises where they have thousands of other products whose prices they can increase. In one case, it was admitted the prices of staple items were increased to compensate for selling alcohol below cost. In effect, in this instance competition law works against the possibility of giving the consumer better prices in the pub but it also works to the detriment of the small operator and in favour of the international giants.

For clarity, I will set out the regulatory framework in which a publican must operate. There are many arms of the State with which a publican must interface. The Garda Síochána has a role primarily in ensuring compliance with the licensing laws. We accept the total legitimacy of this, but are concerned at the lack of even-handed enforcement of these laws, particularly in respect of shebeens and registered clubs. Shebeens operate in many parts of the country, and they seem to be able to operate with impunity. Registered clubs constantly and continuously flout the registration under which they are supposed to operate. All our members ask for in this area is a level playing field and that the rigors of the law be applied evenly.

Our members deal with Revenue for licensing, VAT and PAYE. We accept this as a legitimate part of the business but many of the Revenue audits can be time consuming, laborious and of significant cost to members. The amount of bureaucracy demanded by the National Employment Rights Authority, NERA, particularly with regard to maintenance of records of various types, is a major imposition on small businesses employing between four and ten people. It must be remembered that most of these employers are not human resource specialists and do not have the scale to employ human resource managers; they are entrepreneurs who have built up a business over a long period who give employment with good conditions. In cases where the spirit of the law has been complied with, one wonders whether these police need to ensure that operators are penalised for not having a piece of paper telling them when and where somebody was employed two or three years previously. Recently, I had a case where a publican allegedly owed a foreign national who left him 18 months ago less than €10 and he was told by the inspector to find the individual because the inspector would return after a month to see whether he had paid. It is this type of nit-picking that drives people to despair. Some of these inspectors see themselves as being on a crusade and this was never intended by the legislation.

Environmental health officers, EHOs, have a particular role in respect of food and food preparation and many of the sentiments as expressed with regard to the NERA also apply to EHOs. The smoking ban has been accepted by the vast majority of our members and the latest figures show 98% or 99% compliance, which in real terms is full compliance. Again, we must ask whether it is necessary to come with slide rules and measuring tapes to assess whether an area is 49% or 50% enclosed. The real issue is whether the spirit of the law is being complied with and there are too many cases where a level of common sense is not applied. Last night, I spent an hour with a publican who wants to spend money to employ people in the construction sector to build a reasonably elaborate smoking area. His premises are more than 50% open, probably 60% or 65% open, but because of a problem with the definition of the word "perimeter" the inspector is telling him that if he does so he will close him down. This is where regulation loses its good name. There is a very significant on-going cost in dealing with the demands and the whims of some of the inspectors in this area.

Health and safety officers perform a particularly useful function in respect of ensuring the health and safety of employees and customers. By and large they do not present major problems, except those who seem to have a particular interpretation of some of the laws. With regard to litter, as a result of a recent High Court case a publican is now responsible for the area outside as well as inside the premises even though the premises may not be open. If litter is found in the precinct of the premises the publican can be charged even if he or she has cleaned outside the premises at closing time and the litter is there before opening time. Publicans pay rates, part of which was deemed to cover street cleaning. However, it now appears that these rates are nothing more than a tax on business.

The Consumers' Association of Ireland takes an interest primarily in weights and measures and ensuring that the product sold complies with what it says on the label. The Consumers' Association of Ireland also has a role in ensuring that prices displayed comply with the prices being charged. There is no significant issue in respect of this, provided the duties are carried out in an even-handed manner. Local authorities provide little by way of service but plenty in terms of charges by way of rates and water rates. Publicans engage with the local authorities in respect of planning and in many cases, with fire officers who have a role in the licensing of premises with dance licences, and so on. I am aware of one county where the fire officers charge an inspection charge of €700. This is for a service that probably takes a maximum of two hours. We suggest that any charge for this type of service is not defensible as such services are paid for in the rates.

It may be argued that all these arms of the State are necessary. We argue that the combined effect of all these regulatory authorities, rather than the particular effect of any one individual, is what causes increased costs, significant management time and the disincentive to invest in premises and people. It can be seen from what I have said that a small operator employing half a dozen people needs to be an architect, an engineer, a human resource specialist, a tax specialist, a licensing law specialist, a hygiene specialist and many other things before he or she learns anything about customer care, marketing, running a business or dealing with customers.

We do not suggest that there should be no regulation. We saw the results of that in other areas. We suggest rationalisation of the various arms of regulation where there is more of a one-stop shop rather than having competing agendas at play from different agencies, as often happens. The combination of all this regulation puts small operators at a particular disadvantage as the time spent in dealing with various agencies could be better spent looking towards developing and building their businesses. There is also the clear additional cost of employing accountants, hygiene specialists, engineers, and so on, to assess the requirements and to provide advice. We would like a situation where the relevant labour, hygiene, safety, refuse and other issues are dealt with by one quango rather than six. This would lead to significant streamlining and the greater possibility of generating additional jobs and providing more secure businesses. We are already dealing with approximately 12 arms of the State. I have not yet mentioned the smoking ban and drink driving laws, which have led to the loss of thousands of jobs in the sector. Leaving those to one side as I do not think there is time to rehash those issues again, I hope my presentation shows the rather unfair environment in which small operators are at a distinct disadvantage against the large competitors. This disadvantage is unfortunately copper-fastened by the regulatory framework in which they have to operate and survive. This regulatory framework is costing jobs and will continue to cost jobs in the years ahead, as it is unfair and is working against the operator who provides the five, six, eight or ten jobs, the type of business on which the economy has been built over the years.

I welcome the delegation from the Vintners Federation of Ireland. The committee is pleased to hear its presentation. I note that Mr. Cribben states that a publican would need to be an architect, an engineer, a human resource specialist, a tax specialist, a licensing law specialist, and a hygiene specialist. Having grown up in a pub, I would have thought he would also have to be a psychiatrist, a philosopher, a theologian and an anthropologist. That said, there is one common denominator which must occur to every member of this committee, that business sectors all over the country, irrespective of which discipline, have come before this committee and stated repeatedly they believe there are too many rules and regulations, that there are too many chiefs and not enough Indians. One cannot but be impressed by the argument they make, that they would prefer to be ruled by one quango than six. Irish business has come to the conclusion - to which I came some time ago - that no sooner is one fellow gone out the door with a biro and a notepad than another fellow comes in the back door with a slide rule and a mechanical drawing set and this is causing absolute havoc for small businesses. It is time for a committee of this House to sit down to consider all of this duplication and triplication to see what can be done to resolve it. These are rules and regulations which have grown up over the years. Some of them come from EU regulations and directives and some as a result of statutes and statutory instruments. No matter from which direction they come, in truth, the victim is the person involved in small business trying to get along with his or her life, who employs a number of people and is trying to raise a family.

I am interested to read the views of the drinks industry - the vintners - about the business and how it is going. I note that business has decreased significantly, that alcohol sales in pubs in the first eight months of the year were down by just over 14% and that alcohol sales in the past three years have fallen by 24%.

While the sale of alcohol in pubs has decreased, has there been a parallel increase in the drinks sold in other outlets? Have off-licences, supermarkets and other outlets increased their sales? I take it this has a direct influence on under age drinking, whereby drinks are bought in these outlets and consumed, very often, by young people. I recall as Minister for Justice introducing a law of strict liability with regard to young people in public houses and in other licensed premises where drink is consumed. That law was very successful. Only a minority of publicans in any event were flouting that law but in so far as they were, and in so far as it could be contained, it has been. The difficulty now is that a substitute has come on board and young people are accessing alcohol in other outlets and consuming it off any premises, in parks and in areas outside their own homes, and so on. The next problem is drinking at home. A decrease in drinking in public houses by adults very often is compensated for by people drinking at home. I ask for the views of the delegation in respect of how big a problem this is perceived to be. In general terms, I welcome the organisation as being a responsible body which has regulated and represented its industry well down through the years. It is important that the traditional Irish pub be preserved in so far as this is possible, not just in the interests of tourism and tourists but also in the interests of the indigenous population.

I invite Mr. Cribben to address the points raised by Deputy O'Donoghue.

Mr. Padraig Cribben

The overall consumption of alcohol per capita has dropped over the past three to four years. Five or six years ago, in excess of 70% of all alcohol was consumed in the pub, with 30% in other venues. The 2009 figures show a decrease to 45% to 48%. Less than half of all the alcohol consumed is now consumed in a pub. The pub is a controlled environment. The vast majority of publicans see themselves as having a responsibility towards the people who drink in and use their pubs for recreation, to the point where in rural Ireland, many of the publicans have invested in seven-seater and nine-seater buses to bring people home at night and without any relief on VAT or VRT. The level of home drinking is creating a future problem from the point of view of under-age drinking, the frequency of drinking and the volume being consumed. A health problem is being stored up, particularly in the context of under-age drinkers. If a young fellow is in a pub, it is easy to determine whether he is drinking orange juice or an alcoholic drink but if a third party purchases alcohol for him to drink or if he drinks in the home, it is almost impossible to control his consumption.

I was disappointed that the new guidelines on under age drinking seem to suggest the target cohort is in pubs rather than elsewhere. I do not deny that individual publicans have been guilty of serving drinks to under age customers but they are in the minority. The real issue arises outside the pub and that is where our attention should be focused.

How would Mr. Cribben resolve the problem of under-age drinking outside pubs?

Mr. Padraig Cribben

The big issue is affordability. One can read the supermarkets' special offers in any newspaper. Essentially, they are selling alcohol at a price that our members cannot dream of matching. The way to address affordability is not through the taxation that certain health professionals advocate because that penalises legitimate and moderate drinkers as much as other drinkers. We could either follow the model being considered in the North of Ireland and set a minimum price based on the alcohol content of products or else ban the below cost sale of alcohol. My organisation lobbied hard in advance of the removal of the groceries order because we realised it would create a major problem, the fruits of which we are now seeing. Parental and individual responsibility is important but as long as alcohol is sold for 70 cent per bottle, or half the price of water, the problem of under age drinking will remain.

For several years, the media portrayed those who represent vintners, whether in Dublin or elsewhere in the country, as having a disproportionate influence on politicians. It is claimed that what they have to say becomes law, to the detriment of society. How would Mr. Cribben respond to these claims?

Mr. Padraig Cribben

I would respond with a certain degree of mirth. If we had that level of influence, we would not have seen the changes to the drink driving legislation, which I believe in my professional capacity and as a parent and a driver were ridiculous. We would not have introduced the smoking ban or the legislation I referred to in my introduction. We would love to think we could have that level of influence but it is a myth.

An old Irish adage used when one resolved a mathematical theorem is "mar a bhí le cruthú - as was there to be proven".

I welcome the representatives of the Vintners Federation of Ireland. The importance of this sector to the economy cannot be overstated, particularly in respect of tourism. The reason people return to Ireland is the joy, entertainment and craic they find in the local pub. I commend the members of the Vintners Federation of Ireland for providing service and goodwill and I hope tourist numbers substantially increase in coming years.

Like Deputy O'Donoghue, I come from a pub background and from an early age I collected glasses. The food served in pubs has changed considerably since then. It was once a great new concept to serve cheese and crackers but the food offered by publicans has improved dramatically.

I agree that we need to streamline the regulatory environment. A publican has to deal with the entire spectrum of issues that arise in managing a licensed premises. I hope there is scope in the Croke Park agreement to examine certain bodies which appear to be very well staffed, with the result that considerable time is spent on visits to publicans and hoteliers. Vintners and hoteliers appear to suffer more than society gains from these visits. These bodies should be examined with a view to making them more efficient and effective, so they can benefit the vintners and hoteliers who serve society.

As a Dublin Deputy, I am not familiar with the question of shebeens.

Mr. Cribben clearly stated that shebeens have unfair competitive advantages. What is a shebeen, where are they located and how many exist? Is it an issue which needs to be addressed by the authorities?

If this committee can help the Vintners Federation of Ireland to improve the service it offers to society, we would be happy to do so.

Mr. Padraig Cribben

Shebeens are places where alcohol is sold without a licence. They are totally illegal. One or two infamous shebeens have cropped up in the past 12 months, including one which was plastered across a Sunday newspaper for several weeks. In effect, it gave two fingers to the law. The Garda authorities are aware of the issue and are taking action. However, it appears to our members that it takes a very long time to act. Furthermore, the sanctions appear to be limited compared to the rewards shebeens are able to generate. I have seen photographs of outlets which are not only selling beer without a licence but which allow people to smoke or play on gaming machines in the background. All these elements are illegal. Our members are frustrated because if they happen to have some guys in the pub 15 or 20 minutes after closing time, they are clamped down on - that is the law - whereas these shebeens are operating openly, in effect, and have been doing so for some time. I am aware of one that is less than 50 miles from here. It has been operating openly for the guts of 12 months. It has been visited by a Sunday newspaper, which has reported on the matter in three different editions. It is still operating. I could probably replicate the details of that case in every county in the country.

I thank the Vintners Federation of Ireland for its presentation. One would want to be blind, or living in another planet, not to see that pubs are struggling. Like Deputy Ardagh, I represent a suburban constituency. I do not know how some of the pubs in my locality are keeping their doors open, to be honest. I am not terribly convinced that the huge fall-off in business is entirely due to competition from supermarkets. A cultural change is taking place. I am not convinced that if people were not drinking at home, they would be going back to pubs to drink.

Oireachtas committees often hear representations from people who lobby for their own businesses and argue that things would be better if their competitors had to charge more. While I find it hard to believe the federation when it says it is concerned about under-age drinking, I accept that pubs are suffering as a result of competition from supermarkets. However, I am not convinced that is the nub of the problem. I do not think under age drinking has anything to do with the fact that people are more likely to drink at home. The reality is that under-age drinking has always been a problem in Ireland, despite this country's tradition of high drink prices. It has not been as much of a problem in countries with low drink prices. One could debate this matter forever.

The point I am trying to make is that there has been a huge cultural change. It has had nothing to do with competition. It has been accelerated by the smoking ban, by the enforcement of drink driving laws and, almost certainly, by the recession. If pubs are to survive, they need to change their product. The pubs that are doing well are those that have become more like coffee shops or wine bars, or have started to offer food. I fully accept that such options are not available to all pubs as they try to solve their problems. I do not think the solution involves trying to increase the prices of other businesses. I appreciate that the prices being charged by some of them may irritate publicans.

I have great sympathy with the point about over-zealous regulation and excessive bureaucratic interference. There is a plethora of bodies doing inspections. I suggest that we only need one inspection body. We do not need to send fat trap inspectors, health and safety people and officials from the National Employment Rights Authority into various establishments. By doing so, we are increasing the extent to which costs are pushed on to businesses. I accept that the committee could try to make a difference in this area. I do not doubt that many of these bodies are more assiduous in their work now that they have less to do as a consequence of the recession. They are finding functions for themselves by getting out the slide rule. It is definitely an area in which this committee can help.

I am going to be very rude. I have to leave to speak in the Chamber at 4.15 p.m. I will not be here to listen to the delegates giving out about me. If they wish to respond now, I can stay for two or three minutes.

Mr. Gerry Mallett

I am rather surprised by the Deputy's comments. I have a shop and a pub. I am in contact with many of my members on a regular basis. I see at first hand the damage being done to the health of people here. I am not saying this because I am a publican who is losing out to supermarkets. An article in The Sunday Tribune a few weeks ago reported that one can buy 38 bottles of beer, two bottles of alcopop drinks and a naggin of vodka for less than €50. I do not think this country is well served in such circumstances. I refer, for example, to the health complications associated with the abuse of alcohol that is resulting from the cheap sale of alcohol by supermarkets. The problems caused by the abuse of cheap alcohol sold in supermarkets mean that in years to come, more money will need to be found to supplement this country’s health budget of €16 billion. I can stand over my assertion that the pub is the safest and most regulated place for the sale of alcohol.

I question the idea that a pub is more regulated than a home in which responsible adults are in charge. I accept there is a huge health issue related to alcohol. I am not questioning that. However, I suggest that it might not relate entirely to price. The experience in other countries seems to negate the thesis Mr. Mallett put forward. I accept that we have a problem with under age drinking and a huge health problem. I am not sure the imposition of price increases in supermarkets will solve those problems, to be honest. However, I accept what Mr. Mallett has said.

I welcome Mr. Mallett, Mr. Cribben and Mr. Heraghty from the Vintners Federation of Ireland. My views on this issue are well known in my local area. I honestly believe the pubs are not being treated fairly at the moment. They have not been treated fairly for as long as I have been going in and out of pubs. Those who are not familiar with the licensing laws seem to think six-day and seven-day licences are the only licences. When problems arise, we hear about pubs only. We never hear about hotels, discos, clubs, on-licences, off-licences, restaurants and those with other kinds of licence. Shebeens with no licences have been mentioned today. I agree it is unbelievable that the newspapers have featured a national sporting figure, in all his glory, giving the thumbs up to an establishment that is flouting our licensing laws. It seems that people want to do what they like, when they like and how they like, without a licence or anything else. It is not good enough that shebeens are allowed to exist. They are against the law.

Below-cost sale of alcohol is so sad. Big slabs of booze are being bought on a daily basis in every town and village in Ireland. It is unbelievable and it is doing immense damage to the family fabric of this country. How can we sit back and allow it? It should be stopped. It is the ruination of the people. I am not a doctor or a medical professional, but I believe people's health has been ruined. People buy alcohol because they can get it so cheap. They did not drink as much until the price of alcohol came down as a result of below-cost selling. Throughout the country, one sees clubs with huge signs advertising free admission and below-cost alcohol. They can stay open within certain times. It should be tackled.

On renewal of licences, I accept that the Garda is responsible for administering the law. However, compassion should be shown to publicans who may have problems to sort out due to the economic climate. It is not black and white. Some publicans, as a result of circumstances, may not have renewed their licences in time and they should be given some leeway to sort out their problems. They should not be visited by the Garda and told they have to close that night or the following night. Anyone who is familiar with the licensing trade will know it is not that simple to renew one's licence or to transfer one's licence. The fire officer has to be notified in plenty of time. One has to suit him - he does not normally suit the publican.

One must have everything in order, including one's premises and so on. I appeal to the Garda Síochána to concentrate on those who have been abiding by the law once it has closed all the shebeens.

The National Employment Rights Authority appeared before a committee previously. The staff are very nice people with a large budget. We were told they are not there to hassle, annoy or upset anybody but I do not know what we want NERA for. We should abolish it because we do not need it.

I refer to environmental health officers. Some of them are reasonable but some are not. Who is more interested in the health and safety of people than publicans? Most publicans operating here operate family owned pubs. They are responsible adults who have children, who do not want to break or abuse the law and who do not want anybody doing anything he or she should not do.

The sale of alcohol was in the safe hands of the publicans of Ireland. However, they sadly lost control of it to the multinationals, clubs, shebeens and to anybody who wanted to get into the business.

I refer to consumer associations. People might not agree with me that all businesses should be run on the basis of competition. There should be no need for any of these associations. The people should decide for themselves; they are not fools. They should go to the places they believe are the cleanest, provide the best service and the best value. A safe environment is very important nowadays. I am a great believer in letting competition rule. Let the customer or the punter decide. Why do we have to tell the customer what to do? The customer will make up his or her mind what he or she wants. Customers do not need all the quangos or organisations looking after them.

The person running a business will ensure it is a safe, clean and friendly environment and will do everything to encourage the customers return. We do not need all this regulation. We are not saying there should be no regulation, because we can see the problem with that. There should be a certain amount of regulation. Now that we are experiencing hard times, perhaps somebody should listen to people who have insurmountable problems to solve.

ight and whether they are consuming alcohol. Parents will have to take their responsibility more seriously, realise the dangers of under age drinking and not point the finger at publicans because it is not their fault. Under age drinking will never be eliminated. There will always be someone drinking under age. Parents should try to explain to children about moderation.

I welcome the deputation from the Vintners Federation of Ireland and wish it well. I do not have all the answers but I hope publicans will be able to stem the flow from their premises and that their businesses improve.

Some State bodies do not apply common sense in the way they treat businesses. The bottom line is that some State bodies have almost bullied members of the Vintners Federation of Ireland in regard to some aspects of the regulations being implemented. We are doing a report on the cost of regulation to business. What the Vintners Federation of Ireland have said is that some of its members are closing their businesses because they cannot comply with all the nit-picking and the regulations. We must take that into account in our overall report.

We thank the delegation for appearing before the committee and answering members' questions. We will take what it said in good faith and will implement it as best we can. We may come back to it again for further talks but we will take on board everything it said in the presentation and in the question and answer session.

The joint committee adjourned at 4.25 p.m. until Tuesday, 23 November 2010.
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